<PAGE>1
Form 10 -QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For The Quarterly Period Ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
Commission File Number 33-2775-A
TECHNICAL VENTURES INC.
_____________________________________________________________________________
(Exact Name of small business issuer as specified in its charter)
New York 13-3296819
_____________________________________________________________________________
(State or other jurisdiction of (I.R.S Employer
incorporation of organization) identification No.)
3411 McNicoll Avenue, Unit 11, Scarborough, Ontario, Canada M1V 2V6
____________________________________________________________________________
(Address of Principal Executive Offices, Zip Code)
Issuer's Telephone Number, Including Area Code (416) 299-9280
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of September 30, 1996.
14,586,341 shares of common stock, $.01 par value
______________________________________________________________________________
Page 1 of 11 Pages
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31,
1996
(UNAUDITED)
CURRENT ASSETS
Cash $ 4,871
Accounts Receivable 94,015
Inventory (Note 2) 55,625
Other Current Assets
Advances 35,740
Deposits 8,874
Total Current Assets 199,125
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $508,986 218,279
INTANGIBLE ASSETS, net of accumulated amortization of
$13,930 30,526
$447,930
LIABILITIES & SHAREHOLDERS DEFICIENCY
CURRENT LIABILITIES
Notes Payable (Note 4) $135,230
Current Portion of long term debt: (Note 3)
Capital lease obligations 88,948
Other 1,143,161
Loans & advances:
Private lenders 73,165
Shareholders 23,730
Accounts payable and accrued expenses 422,924
Total Current Liabilities 1,887,158
LONG-TERM DEBT, net of current portion: (Note 3)
Shareholders 302,433
Capital lease obligations 1,637
Other 64,521
MINORITY INTEREST 0
SHAREHOLDERS' DEFICIENCY:
Common stock, $.01 par value, 15,000,000 shares authorized:
Issued and outstanding, 14,586,341 shares 145,863
Additional Paid In Capital 4,048,994
Deficit (6,209,261)
Foreign currency translation adjustment 206,584
Total Shareholders' deficiency (1,807,819)
$447,930
See notes to condensed consolidated financial statements.
<PAGE>3
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
SALES $669,176 $718,794
COST OF SALES 601,169 641,280
GROSS MARGIN 68,007 77,514
GENERAL EXPENSE
Administration 69,712 83,672
Financial
-Interest & Other 62,054 68,377
Research & Development 36,131 36,385
Selling 26,561 27,019
194,458 215,454
NET LOSS ($126,451) ($137,940)
NET LOSS PER COMMON SHARE ($0.01) ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,586,341 14,586,341
See notes to condensed consolidated financial statements.
<PAGE>4
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
1996 1995
SALES $328,645 $286,519
COST OF SALES 284,199 270,238
GROSS MARGIN 44,446 16,281
GENERAL EXPENSE
Administration 36,063 39,492
Financial
-Interest & Other 29,126 27,463
Research & Development 16,565 15,504
Selling 11,987 13,401
93,741 95,861
NET LOSS ($49,296) ($79,580)
NET LOSS PER COMMON SHARE ($0.00) ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,586,341 14,586,341
See notes to condensed consolidated financial statements.
<PAGE>5
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($126,451) ($137,940)
Adjustments to reconcile net Loss to net cash
Provided (Used) by operating activities:
Depreciation and amortization 17,052 27,782
Interest Expense Charged To Debt Principal 11,545
Net Change in non-cash operating assets
and liabilities 102,255 (64,206)
Net Cash Provided (Used) by operating activities 4,401 (174,364)
CASH FLOWS FROM INVESTING ACTIVITIES
Property & Equipment Acquisition (2,606)
Net Cash Used By Investing Activities (2,606)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Line of Credit (14,755)
Long Term Debt 184,456
Shareholders 14,377 (16,844)
Bank Note (5,152) 12,096
Net Cash Provided (Used) by Financing Activities (5,530) 179,708
EFFECT OF EXCHANGE RATE ON CASH 1,054 2,610
CHANGE IN CASH BALANCE FOR THE PERIOD (2,681) 7,954
CASH, BEGINING OF PERIOD 7,552 2,480
CASH, END OF PERIOD $ 4,871 $10,434
See notes to condensed consolidated financial statements.
<PAGE>6
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
PAYMENTS MADE FOR INTEREST $8,663 $19,670
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable $16,489 (363)
Inventory 16,049 9,462
Other assets (1,851) (11,861)
Accounts Payable and accrued expenses 71,568 (61,444)
$102,255 ($64,206)
See notes to condensed consolidated financial statements.
<PAGE>7
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION:
The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to form 10-Q SB and Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for fair presentation have been
included. Operating results for the six months ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
June 30, 1997. For further information refer to the financial statements and
footnotes thereto included in the Company's annual report on form 10-KSB for
the year ended June 30, 1996.
NOTE 2: INVENTORY:
Inventory is comprised of the following:
December 31,
1996
Raw Materials $55,625
NOTE 3: LONG TERM DEBT:
At December 31, 1996 the Company was in default on it's notes payable to Dow
and IOC and it's lease payable to FBX Holdings Inc. Although the respective
creditors have not called the obligations, payments are due on demand and
accordingly the balances are reflected on the December 31, 1996 balance sheet
as current liabilities.
NOTE 4: At December 31, 1996 the Company had a note payable balance of
$135,230 due on demand to Cooper Financial Corp. This obligation, which had
previously been payable to the Federal Deposit Insurance Corporation, as
receiver for another financial institution, is guaranteed by a shareholder of
the Company. At December 31, the Company was in default of the loan
provisions, however, the Company has been maintaining monthly payments of
$2,500 US representing current interest charges. A portion of this monthly
payment is now being credited to the loan principal and as such the outstanding
principal balance reflects the amount which has been paid against outstanding
principal during the first six months of fiscal 1997.
<PAGE>8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources:
During the fiscal quarter ending December 31, 1996, inventory levels decreased
as a result of reduced production. However, slightly higher sales revenue ,
with more favourable pricing in the 2nd fiscal quarter, enabled the Company to
reduce a portion of past due balances due creditors. The Company remains in a
position where it is unable to meet its monthly cash flow requirements.
Three of the Company's long term debt financing arrangements [Note 3] are
currently in arrears. The debtors have verbally agreed to a moratorium on
principal repayments until the Company is in a financial position to make a
payment[s]. Both the Dow and IOC financing arrangements [Note 3] were
technically in default on Jan. 1, 1996; as such these debt's have been
reflected as current liabilities on the December 31/96 balance sheet. Neither
principal has notified the Company of it's default and it is expected that a
mutual understanding of the Company's financial circumstances will preclude any
negative action by either of the principals. Dow reviews the Company's cash
flow projections on an ongoing basis with the objective being a re-
capitalization of outstanding interest with the current principal, thereby
arriving at a payment amount and schedule based on a conservative assessment
of the Company's cash flows.
The Company has submitted a Canadian R&D Tax Claim for fiscal 1995 amounting to
$24,280 (Canadian), additionally a claim for fiscal 1996 of approximately
$17,500 (Canadian) will also be submitted. The tax department has notified the
Company of their intent to audit all such claims submitted.
Present financing arrangements are not considered a long-term solution to the
Company's financial needs. Several major investment banking providers have
been meeting with the Company in respect of it's financial requirements. If it
is deemed to be in the best interest of the Company and its stockholders,
serious consideration will be given to raising additional funds through private
or public issuance's in the future. The Company's current capital structure of
an authorized issue of fifteen million common shares is almost complete.
Therefore, a change in the capital structure would become necessary to raise
additional funds through private or public issuance's in the future.
No significant capital expenditures are anticipated in this fiscal year.
<PAGE>9
Results of Operations:
Sales revenues for the first six months of fiscal 1997 decreased under those
for the corresponding period of the previous year with comparative gross
margins remaining constant, however, a 15% increase in sales revenues occurred
during the second fiscal quarter, over those of the previous years
corresponding fiscal quarter. A result of the summer vacation period coming to
a close during September 1996 and the Company's customers increasing their
ordering to replace depleted inventories.
Efforts in the sale of the Company's proprietary products by the Company's
distributors in the US., Canada and Europe continues. The marketing of the
Company's proprietary material requires highly qualified representation and the
Company has initiated a commissioned representative to market it's proprietary
products in the US.
The Company continues to develop and market the specialty compounding, with
this segment representing 87% of revenue during the first six months of fiscal
1997. The Company continues to pursue several additional contracts of some
magnitude. The Company's efforts in this regard appear promising and it is
anticipated that these efforts will initiate additional business during the 3rd
and 4th quarter of the fiscal 1997.
Gross margins increased 8 % in the second quarter, when compared with the
previous years corresponding quarter; the primary contributing factor being
more favourable pricing. However, lower sales revenues and production volume
over the six month period, resulted in less efficient use of production
resources. Gross margins for the first six months of the current fiscal year
remained relatively constant when compared with the previous year's
corresponding period. The Company continues to operate at well below capacity
In that regard the Company is currently involved with several corporations
which may open additional opportunities in specialty compounding and metal
composites. Known potential quantities are five to six million pounds per
annum; potential revenues are unknown at this time.
Interest and other financing costs for the three months ended December 31,
1996, increased over those for the corresponding period of the previous year.
This increase was due in part to the payment arrangements made in regard of the
Company's line of credit and interest expensed relative to the IOC debt;
additionally less favourable foreign currency exchange during the second
quarter of fiscal 1997. However, for the six month period of fiscal 1997 an
overall decrease in this area of expense was a result of interest charges for
the three months ended September 30, 1995, included charges which were related
to prior periods.
<PAGE>10
Administrative expenses decreased substantially as non recurring costs related
to procurement of I.O.C. debt and payment of vacation due, which occurred
during the previous years fiscal quarter. R&D and Selling expenses remained
relatively stable with those of the corresponding period of the previous year.
The Company continues to take measures to contain all areas of expense.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
(a) Exhibits - none
(b) Reports on Form 8-K
During the quarter ended December 31, 1996, the Registrant
did not file any reports on Form 8-K.
<PAGE>11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNICAL VENTURES INC.
Date: February 6, 1997 BY: Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: February 6, 1997 BY: Larry Leverton
Larry Leverton
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT INCLUDED IN PART I, ITEM 1 OF
THE REGISTRANT'S QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 4,871
<SECURITIES> 0
<RECEIVABLES> 94,015
<ALLOWANCES> 0
<INVENTORY> 35,740
<CURRENT-ASSETS> 199,125
<PP&E> 727,265
<DEPRECIATION> 508,986
<TOTAL-ASSETS> 447,930
<CURRENT-LIABILITIES> 1,887,158
<BONDS> 0
<COMMON> 145,863
0
0
<OTHER-SE> (1,953,682)
<TOTAL-LIABILITY-AND-EQUITY> 447,930
<SALES> 669,176
<TOTAL-REVENUES> 669,176
<CGS> 601,169
<TOTAL-COSTS> 601,169
<OTHER-EXPENSES> 194,458
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,054
<INCOME-PRETAX> (126,451)
<INCOME-TAX> 0
<INCOME-CONTINUING> (126,451)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (126,451)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
